Haim Saban
isn't green about children's programming, but he has decided not to make
the rainbow connection.

The
billionaire investor who built his fortune on Mighty Morphin Power Rangers
and is currently in a heated battle to acquire insolvent German media
group KirchMedia no longer wants to buy Muppet-makers Jim Henson Co.,
a person close to the situation said on Monday.

The withdrawal
by Saban, who submitted a non-binding offer
five months ago, is the latest blow in the protracted saga to sell
the lovable kids characters at what likely will be a steep discount to
what the current owners paid just three years ago.

Saban's decision
comes days after embattled German media rights group EM.TV & Merchandising
AG, which owns the stable of singing puppets, including Kermit the Frog
-- who famously sang "The Rainbow Connection" and "It's
Not Easy Being Green" -- said it ended talks
with Dean Valentine, the former television executive. Valentine had
been aiming to buy a minority stake.

Valentine
said he is structuring a different bid and sources said privately held
Classic Media, which owns the rights to children's characters, also is
still trying to work a deal. Classic Media officials could not be reached.

As
part of a recent financial deal with Sesame Workshop, EM.TV freed
the owners of Elmo and Big Bird to create entertainment-type programming,
which will compete against the Muppets franchise...

EM.TV paid
$680 million for Jim Henson Co. three
years ago and has been trying to sell the business for more than a year.
In the meantime, it has sold off chunks of the company, including the
"Sesame Street" characters Henson created.

Critics say
the sale has been painstaking because EM.TV has mismanaged the popular
children's characters in the short time it has owned them.

As part of
a recent financial deal with Sesame Workshop, EM.TV freed the owners of
Elmo and Big Bird to create entertainment-type programming, which will
compete against the Muppets franchise, said one person familiar with the
arrangement.

Sesame, which
produces the classic children's series "Sesame Street," had
been allowed only to create educational programming with the characters,
this person said.

A Sesame
Workshop spokesman said executives were not immediately available for
comment.

People
familiar with the Muppets operations also have said the company's distribution
and licensing deals are unfavorable and cannot be reworked for several
years. They added that the company is overstaffed and that it needs a
capital infusion to rebuild the brand.

Saban initially
bid $128 million before completing due diligence last October and before
EM.TV monetized a debt owed by Sesame that was to be a source of income
for whomever bought Henson. He later reduced his offer to about $50 million,
one source said.

Now, however,
Saban is embroiled in a takeover battle for KirchMedia, grappling with
a rival bidder, private German publisher Heinrich Bauer Verlag.

After meeting
on Monday, creditors of the TV group, majority owner of broadcaster ProSiebenSat.1,
demanded a decision from Kirch on the competing bids by the end of the
week.

Fan site Muppet Central created by Phillip Chapman. Updates by Muppet
Central Staff. All Muppets, Bear characters are copyright
of The Muppets Studio. Sesame Street characters are copyright of Sesame
Workshop.
Fraggle Rock, Creature Shop and similar likenesses are copyright
of The Jim Henson Company.
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